Foxtel the biggest loser as content streaming wars ignite

By in Australian Economy, Featured Article

| 41 comments

Australia’s video-on-demand streaming market is becoming crowded, with incumbents Foxtel, Netflix, Stan, Amazon and Hayu set to be joined by offerings from Apple, Alphabet, Disney, Facebook, Hulu, HBO, CBS and NBC.

It seems the biggest loser in this war of attrition is Foxtel, which lost its monopoly grip and continues to bleed cash:

Rupert Murdoch’s News Corporation is on the slide, once again reporting a loss – $306.7 million for the September quarter…

Australia was one of the drivers of the loss, with the company saying it was hit by “challenges in the Australian housing market” and “lower subscription revenues at Foxtel”…

The 65 per cent-owned Foxtel is an ongoing sore, with News Corp having to stump up an extra $200 million in the quarter to bring its total loans to Foxtel to $700 million. Overall Foxtel debts top $2.3 billion and News presaged a debt restructure in coming weeks to try to put the group on a more solid financial grounding…

Excluding the effects of currency movements, Foxtel revenues were down 3 per cent because of “lower broadcast subscribers and changes in the subscriber package mix”.

That means that less people are choosing Foxtel and those that do opt for cheaper deals. Subscription falls are partly offset by growing memberships of video on demand offerings Foxtel Now and its sports partner Kayo.

But they are cheaper than the traditional offer and overall “revenue per unit (subscriber) has fallen from $100 to $78 in recent years,” said independent media analyst Peter Cox.

In doubt Netflix is too concerned about the flood of new subscription services. It is the incumbent powerhouse and has a tonne of original first party content, making it a ‘must have’ for many households.

The same cannot be said for Stan, which has a much smaller subscriber base and lacks the same exclusive first party content.

But the biggest loser is Foxtel, which has been forced to pivot from high margin cable services to cheaper online streaming, with limited success.

More broadly, one wonders whether Australian households are now experiencing à la carte subscription fatigue. While video-on-demand streaming was initially viewed as a cheap option, especially when compared to Foxtel cable, the myriad of services now on offer and the bifurcation of content has meant that households need to subscribe to multiple platforms to satisfy their viewing needs. And the costs are quickly mounting up.

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Comments

  1. JasonMEMBER

    I called Foxtel last week – said I wanted to cancel my membership – they gave me $40 a month off for the next 12 months.

    • HadronCollision

      What do you have it for? MLB, NBA, NHL, golf, cycling , soccer? Or is there some sort of obscure Nordic winter time sport I am missing out on (<- I DO love me some curling though)

  3. DominicMEMBER

    You guys are way too bullish on Netflix’s prospects — they are light years away from making stable profits and now all this competition coming down the pike from very powerful players with heaps of their own content. Fight to the death.

    Maybe Netflix, the brand, survives but right now they are struggling to work out how to get to the promised land without jacking up subscriptions 100%

    • Uranium GeoMEMBER

      Have to agree without the VPN Netflix Australian offerings are now circling the drain. Sat down yesterday to see what was on offer and was underwhelmed. Presently trialing Amazon Prime and will probably go with that service in the short term. Kayo looks like a good service for the sports nut also.

      • JasonMEMBER

        I reckon Amazon Prime is pretty good. I got it to watch “The Boys” and have kept it a few months later. It mostly pays for itself anyway because you get free delivery on most Amazon stuff if you are a Prime member.

        • darklydrawlMEMBER

          The US library is far more extensive than the Ozzie one from what I have seen. I only use the US netflix via a VPN. Been a customer for years.

    • NikolaMEMBER

      I hope Newscorp buys Netflix for sh1te load of money like they did with MySpace and and then fck it up like they did with MySpace. But this time it will be a mortal mistake for these leaches that only make money when they have monopoly and can’t compete.

      • DominicMEMBER

        Don’t worry. Once Rupe has kicked the bucket and his children take over it’s all down hill from there. They’re not the sharpest tools his kids.

        • BubbleyMEMBER

          The Victorians used to say something along the lines of “The first generation makes the money, the 2nd increases it and the 3rd squanders it”

          Seems true and looking at James Packer, Ruperts kids and Gina Rineharts children, it looks as though its likely to happen again.

    • AsuraMEMBER

      Definitely not a free ride for them, but its still much better priced per hour of entertainment than many other activities and will be one of the last things to be cut off when budgets gets strained .

      • DominicMEMBER

        To be clear – I’m not here to bag them. I have a subscription myself and enjoy it very much. I’m just making the point that they have to make money for investors eventually or they’re toast.

        • AsuraMEMBER

          Oh no i didn’t mean to imply that you were, I was just talking in a broad sense that netflix like other streaming services are good deals compared to what we have had in the past or just what other activities offer per price, video games would be another example where modern digital entertainment offers a much higher bang for buck and i think it will be interesting to see how they perform in dire economies.

          • haroldusMEMBER

            MS gamepass is quite good value IMHO.

            If I really like the game I’d buy it, but you get a decent exposure to a variety of games

    • Jacob

      Yep. The Office is the most popular show on Netflix and Netflix did not produce it.

      45.8 billion minutes watched compared to the buzzy Netflix original “Stranger Things,” which clocked in at 27.6 billion minutes.

      How much is Netflix worth on the stock exchange? Over $110 billion? Crazy valuation.

      The company has said that it will produce more than 50 shows for the U.K. market this year with a budget of more than $500 million

      Crazy. Producing more content than people have time for.

      When we can’t cope with the bewildering array of offerings, we opt out completely. Or revert to the safe and familiar — which might explain why I found myself bypassing all the new releases and once again watching reruns of Relations and the City.

  5. HadronCollision

    We have Stan, love it. Just for Power, Billions, The Flash, The Circus, Made in America alone it’s worth it, plus kids stuff. Broadchurch, was that Stan?

    Netflix for Stranger Things, The Crown and loads of stuff I don’t need, good for Mrs Hadron Collision as a stay at home mum

    Will get Disney just for kids stuff and The Mandalorian plus Star Wards/MCU catalogue

    Amazon prime, you can find Jack Ryan, MITHC etc elsewhere

  7. mikef179MEMBER

    I have Netflix and Amazon but rarely even watch them any more. Mostly I just watch YouTube. Surprisingly, it has absolutely tons of great content, if you’re not that interested in over-produced, over-hyped junk.

    • BubbleyMEMBER

      I don’t understand how the old bugger is still alive, let alone with a fully functional frontal lobe.

      Maybe he’s a fine example of German bio technology?